News, 27 January 2026
India and the European Union are on the cusp of finalising a landmark free trade agreement (FTA) that could sharply reduce import duties on European luxury electric vehicles (EVs), potentially transforming India’s premium EV market. Reports from The Economic Times, Business Today and Reuters confirm negotiations are entering a decisive phase, with the pact expected to be unveiled around the India-EU Summit in late January 2026.
Under the proposed FTA, import tariffs on cars from the 27-nation EU bloc currently as high as around 100-110% on fully built units could be cut to roughly 10–15% over time. This is a substantial reduction from today’s steep levies that have kept luxury EV prices very high in India and limited the presence of European EV models in the country.
While some reports also indicate that initial tariff reductions may involve an intermediate cut to around 40% for certain vehicles before further lowering, the long-term target is a more competitive duty band that significantly narrows the price gap between imported premium EVs and locally produced alternatives.
The duty cuts could unlock several benefits for India’s automotive sector. European brands such as BMW, Mercedes-Benz, Audi, and Volkswagen which have strong EV lineups would be able to price their high-end electric models more attractively for Indian buyers. Industry analysts foresee a potential surge in interest and availability of premium EVs, especially those that currently cost over ₹1 crore due to steep import taxes.
However, the deal is also expected to carefully balance increased market access with protections for domestic manufacturers. Local value-addition requirements and phased tariff reductions are likely part of the framework to ensure that Indian firms like Tata Motors and Mahindra & Mahindra are not unduly disadvantaged.
If concluded as anticipated, the India-EU FTA would not only deepen economic ties between the two trading partners but also inject fresh momentum into India’s evolving EV ecosystem by broadening consumer choice and encouraging premium EV adoption.
Compiled using AI
